Welcome to the Federal Tax Update Podcast, hosted by Lynn Nichols. This is presented as a member benefit by the South Carolina Association of CPAs. It is produced to provide current information about developments in U.S. tax law, such as cases, ruling, IRS pronouncements and expert comments on hot topics.
Nichols note on the Practice Units in item No. 5: “All you ever need to know about income tax accounting for the sale or exchange of a partnership interest is in the IRS Practice Unit appropriately titled “Sale of a Partnership Interest.” The Document Control Number that will help you find it is PAR-T-006.
“The IRS offers a wealth of information with its Practice Units at www.irs.gov/businesses/corporations/practice-units. Topics such as common transactions for sale or exchange of a partnership interest are explained with simple examples and illustrations.
“I have mentioned several of these training aids in our weekly tax update podcasts. The IRS develops these to teach its auditors to deal with complex transactions. We now have guidance on S corporations, foreign transactions and now partnerships. It’s free – and it’s really good material.”
Trending in this edition:
The IRS extended the 2021 return filing and payment deadlines from April 15 to May 17, but with some hesitant thumbs-up among tax professionals.
Tax preparers are bracing for a raft of new, expanded and sometimes retroactive provisions of the American Rescue Plan that promise financial assistance to millions of taxpayers, and millions of headaches for their tax professionals. [Tax Notes Today, 3/15/2021, article by William Hoffman]
The Joint Committee on Taxation in a March 12 report, prepared in advance of a March 16 Senate Finance Committee hearing, summarized domestic manufacturing tax incentives. [JCX-15-21, 3/12/2021]
Excerpts are available of the American Rescue Plan Act of 2021 (P.L. 117-2), as passed into law, which provides various forms of coronavirus pandemic relief, including expansions of the child and earned income tax credits, additional economic recovery rebates, and a suspension of taxes on unemployment compensation, among other measures. [ARPA of 2021, 3/15/2021]
The IRS has released a practice unit on the sale of a partnership interest, addressing ownership changes, proper reporting of gain or loss, proper consideration of the partnership’s section 751 or section 1250 property, and section 754 elections. [PAR-T-006; 3/12/2021]
The IRS issues instructions on how to file tax returns claiming unemployment compensation exclusion, including advice for those who have already filed. [Tax Notes Today; 3/16/2021, article by William Hoffman] [IRS webpage, updated March 12]
The Tax Court held that an attorney was an employee of her S corporation law firm and the firm was liable for employment taxes on wages it paid to her. The court denied the firm’s unsubstantiated expense deductions and held that the attorney had unreported flowthrough income and wages from the firm as well as income from cancellation of indebtedness. [Lateesa Ward et al.; T.C. Memo. 2021-32, 3/15/2021]
The Tax Court held that an individual is liable for the 10% additional tax under section 72(t)(1) because he received a distribution from his IRA before attaining the age of 59-1/2, finding that the separation from service exception at section 72(t)(2)(A)(v) doesn’t apply to early IRA distributions. [John A. Catania; T.C. Memo. 2021-33, 3/15/2021]
Because implementation of the American Rescue Plan Act of 2021 is still under review and guidance is still forthcoming, taxpayers are strongly urged to not file amended returns or take unnecessary steps related to new provisions at present time, the IRS said in a March 12 statement. [IRS Statement — American Rescue Plan Act of 2021, 3/12/2021]
IRS Plans to Automatically Refund Taxes Paid on Unemployment
Taxpayers who have already filed their 2020 income tax returns and paid taxes on unemployment compensation that is now excludable will not have to file amended returns to get a refund, according to IRS Commissioner Charles Rettig. [Tax Notes Today; 3/19/2021, article by William Hoffman]
Passthrough entity owners should be adjusting the basis of their interests when the expenditures for forgivable loans are made without regard to when those loans are forgiven, according to the AICPA. [Tax Notes Today, 3/17/2021, article by Nathan Richman]
AICPA Seeks Guidance on Tax-Exempt Income From Forgiven PPP Loans
The AI CPA has requested further guidance on the tax treatment of tax-exempt income from forgiven paycheck protection program (PPP) loans to partnerships and S corporations, highlighting some uncertainties and proposing solutions regarding the timing for tax-exempt income inclusion, proper treatment of qualified PPP expenses for S corporations, and proper reporting. [AICPA letter, 3/15/2021]
The IRS has reminded (IR-2021-57) taxpayers about the rules for required minimum distributions from retirement accounts, noting changes to the age at which a person is required to take their first RMD and related relief provided by the Coronavirus, Aid, Relief and Economic Security Act. [IR-2021-57; 3/16/2021]
The Eleventh Circuit affirmed a Tax Court decision that held that casino revenue distributions the Miccosukee Tribe of Indians of Florida made to its members constituted taxable income, finding that the distributions are not exempt from taxation under a statute that exempted an earlier land transfer or as lease payments for use of the tribe’s land. [James Clay et ux.; CA 11, No. 19-14441, 3/16/2021]
Missed last week’s Tax topic? Catch up with Lynn when you check out his Tax Updates video playlist.
All commentary is brief, and you should not take a position on the items discussed until you thoroughly examine it with authoritative sources. The topics can be found discussed in further length at Tax Notes Today.
“I have relied on Tax Analysts® to provide reliable and timely analysis of Federal tax developments for over 30 years. The ‘headnotes’ you see here are from ‘Tax Notes Today,’ the preeminent source of accurate information and analysis of important developments and trends in Federal taxation,” Nichols says.
You can contact Lynn Nichols at lynnnicholscpa@outlook.com or 714.321.3387 and connect on LinkedIn.
A federal tax specialist for 50 years, Lynn Nichols provides tax consulting services to CPA firms on complex federal income tax issues, professional standards in tax practice and effective tax practice management.
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